Managed Futures Account - Alternative Investment

Managed Futures Account Definition

A managed futures account (MFA) is an alternative investment strategy where an investor allows a professional money manager known as a commodity trading advisors (CTA) to invest funds in the global futures markets.&

Managed Futures Account Definition

A managed futures account (MFA) is an alternative investment strategy where an investor allows a professional money manager known as a commodity trading advisors (CTA) to invest funds in the global futures markets. A managed futures account allows an investor to take part in the market on both a long and short side. Managed futures accounts have gained popularity in recent years as investors look to invest globally in the bull markets of China and India.

Why have a managed futures account

A managed futures account allows an investor the ability to further diversify their portfolio. A number of studies have been conducted which show that while MFAs do not greatly outperform the Dow, they do however have no correlation. This means that an investor can expect similar returns from their MFA, while not having the same exposure or risks that come with the stock market. This is because the MFA will be invested in anything from oil to a foreign exchange, which may have a negative beta.

Selecting a Managed Futures Account

Investors have to take extreme caution when selecting a MFA. While a MFA is initially setup to hedge against risk, it can also be risky itself. Remember, futures and options on futures are traded in a MFA; this is reason enough to make sure you are dealing with a trading professional that has a proven track record for handling the inherit risks associated with the leverage from the futures market. Your CTA should show years of proven success with managing futures accounts and their trading plan or approach for operating in the markets. Lastly, CTAs charge a management fee for their trading activities. This fee can range from 20% - 50%. It is important to verify that the fee charged by the CTA is warranted based on their average annual return.

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Tim Ord

Ord Oracle

Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...